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Savers are abandoning the stock market at a rate not seen since the financial crisis of 2008 amid fears that another global recession is looming, The Daily Telegraph has found....
High inflation, the US debt crisis and ongoing problems in eurozone countries such as Greece, Portugal and Ireland have left ordinary investors feeling that they have “nowhere to hide”, experts said....
The growing uncertainty in the safety of the stock market came as the FTSE 100 index dropped by one per cent - wiping £15billion off the value of Britain’s most successful companies after poor economic data from the United States. The index has fallen two per cent in the past week....
Such is the growing uncertainty in the markets that Moody’s, the credit rating agency, yesterday threatened to downgrade Spain as the eurozone’s troubles continue.
Private investors too have become so rattled they are putting just a 10th of the average amount placed in the stock market in recent months....
Sales of gold funds increased 58 per cent last week, according to Barclays Stockbrokers, and sales of BlackRock’s Gold and General fund increased 33 per cent between June and July.
The most worried investors are selling stocks now and switching their investments into cash, in spite of the risk that it will be eroded by inflation....
In Europe, Moody’s said it was reviewing Spain’s credit rating and would probably downgrade it by one level. Shortly after this warning, the Spanish government called a surprise early election for November....
John Chatfeild-Roberts, the chief investment officer for Jupiter Asset Management, said that the developed economies would struggle for “several more years”.
“The whole developed world is struggling with being over-indebted,” he said. “There are problems with UK and US property markets, economic deficits, Greece, Spain and Ireland.
“Authorities are trying desperately not to let debt default and at the same time inject economies with inflation so that the debt is reduced. Savers bear the brunt of this.
“Unfortunately we think this will go on for quite some time – several years. It can gradually wind down, but we have to wait.”
Spain is still in “the danger zone” and must keep up momentum in restructuring its economy to stave off contagion from Europe’s sovereign-debt crisis, the International Monetary Fund said.
“The outlook is difficult and the risks elevated,” the Washington-based IMF said in a report yesterday after a visit by staff to Spain. “The policy agenda remains challenging and urgent -- there can be no let up in the reform momentum.”
U.S. stocks fell five straight days, driving the Standard & Poor’s 500 Index to its biggest weekly loss in a year, as lawmakers’ failure to agree on raising the federal government’s debt limit brought the nation to the brink of default.
Treasuries surged, driving 10- and 30-year yields to the lowest levels this year, as U.S. lawmakers deadlocked over raising the debt limit and the economy grew more slowly than forecast.
Benchmark 10- and 30-year debt rose in July the most in almost a year, and Treasuries’ returns recouped all of their June losses. At the same time, rates climbed on bills maturing just after the Aug. 2 debt-cap deadline. The economy added fewer-than-average jobs this month, a report next week is forecast to show.